Banks extend more net loans than expected

Chinese banks extended more loans than expected in September, buoyed by demand from home buyers and companies.

September loan data released on Saturday indicate that China has continued to give significant credit support for its economy ahead of a key Party congress that starts on Wednesday.

Both bank lending and total social financing, a broad measure of credit and liquidity, look set to hit another record high this year.

Zhou Xiaochuan, governor of the People's Bank of China (PBC), was quoted as saying in a statement posted on the bank's website that the economy this year is stabilizing and growing more strongly, and that the momentum may continue into the second half.

Household loans, mostly mortgages, rose to 734.9 billion yuan in September from 663.5 billion yuan in August, according to Reuters calculations based on the PBC's data.

Household loans accounted for 58 percent of total new loans last month, down from 61 percent in August.

Short-term loans soared in the third quarter, increasing by 1.53 trillion yuan, almost three times higher than in the year-ago period, according to calculations by Wen Bin, an economist at Minsheng Bank.

"A part of these funds is flowing illicitly to the property market and stock market," said Wen.

Corporate loans in September were 463.5 billion yuan, down from 483 billion yuan a month earlier.

The growth was in part due to a "seasonal increase in credit and fiscal deposits," said Wen.

Broad M2 money supply (M2) in September grew 9.2 percent from a year earlier, beating forecasts for an 8.9 percent expansion.

The PBC has said that the slowing M2 growth could be a "new normal" due to regulators' stepped-up crackdown on risky shadow lending activities.

Total social financing, a broad measure of credit and liquidity in the economy, rose to 1.82 trillion yuan in September from 1.48 trillion yuan in August.

The PBC has been steadily moving to contain financial system risks, while reiterating that it will maintain prudent and neutral monetary policy and continue with interest rate reform.

Governor Zhou, in the statement posted on Saturday, said positive progress has been achieved in economic transformation.